To Avoid Foreclosure

A number of years ago there was a popular book entitled, “When Bad Things Happen to Good People”. Today, that could describe the nightmare of foreclosure that is facing many families Foreclosures in Casa Grande Arizona.

Foreclosure can be stopped dead in its tracks before it derails you.

The first step to avoid foreclosure is to deal with the facts honestly and openly. DO NOT BE AN OSTRICH! Call or contact your lender as soon as you are aware that you will fall behind in your payments. Lenders want your money, not your home. In many cases your lender will work to help you avoid foreclosure. With foreclosures increasing every day, the last thing most lenders want is another house to dispose of. In the long run, most legitimate lenders realize that helping you to avoid foreclosure will be to their own benefit. (Lenders are not charitable institutions, however. They might view the totality of circumstances, including your long term prospects, the amount of the loan versus the equity, your payment history, etc, in a way that might accelerate the foreclosure process.) In any case, it is important to notify your lender ASAP if you want it to help you avoid foreclosure.

To Avoid Foreclosure: Important Dates

The most important date to remember when it comes to being able to avoid foreclosure is the 16th day after the mortgage payment is due. Even though the payment statement states you have until the 16th to avoid late fees, what it really means is that you have until the 16th to avoid the onset of the foreclosure process. This is how it works:

Your payment is due on the 1st.

If you miss it, then between the 16th and the 30th the lender will levy late fees and attempt to contact you. It is easy to see that if you want to avoid foreclosure, contacting the lender before they contact you can be important.

Sometime between the 45th and 60th day after the payment is missed (and possibly 2 payments) a notice in the form of a letter and possibly email goes out to the borrower. This notice tells the borrower about the breach of the mortgage agreement and gives a period of time, generally 30 days for the borrower to avoid foreclosure by paying the delinquent amount, including late fees, etc.

Between the 90th and 120th day, the loan is referred to the foreclosure department and foreclosure proceedings are started. You can still avoid foreclosure at this point or at least salvage some money, by going back to the first step above: contact your lender. You are not alone in falling behind, but the sooner you contact your lender, the more distance you put between yourself and those folks who cannot avoid foreclosure.

At this point, the state law of where your house is located becomes important. The timing of the foreclosure, the redemption period, if any, the notice provisions and other dates and procedures are governed by state law and can vary from 150 days after missing the 1st payment to 415 days or even longer. If you are caught in a foreclosure situation, please check with an attorney or other legal counsel such as local legal aid to determine what, if any, the period of time you may have to avoid foreclosure sale.

Lender Options to Avoid Foreclosure

Repayment Plan: Some lenders will agree to spread out repayment of the missed payments over some period of time to enable you to avoid foreclosure if you are experiencing or have experienced a temporary setback, such as a medical emergency other unforeseen financial problem.

Loan Modification: Mortgage lenders have the ability to adjust the terms of your loan in order to help you avoid foreclosure. Common adjustments are lengthening the amortization schedule, in other words, lowering your payments by extending the length of your mortgage. Some lenders may also allow you to roll the delinquent payments into the loan amount and reamortize the new total to avoid foreclosure. Obviously, the interest rate may also be changed.

Short Sale: This method of trying to avoid foreclosure depends on a lender willing to forgive the remainder of the debt by allowing you to sell the house for less than the debt and forgiving the balance.

Short Refinance: This is a combination of some of the debt being forgiven and the rest refinanced into a new loan.

Bankruptcy – Be Careful: The Cure Can Be Worse Than The Disease

Homeowners who are in danger of losing their homes can stop the foreclosure by declaring bankruptcy. Chapter 13 is called the home saver because filing for it stops foreclosure proceedings and allows the homeowner to stay in her or his home. However, (it seems there is always a “however” these days), a schedule of payments set out by the bankruptcy court must be adhered to or the foreclosure may be started again.

REMEMBER: Once more state law governs such issues as how much equity a homeowner can keep and what percentage of her income can be allocated for payments to creditors.

Avoid Foreclosure By Becoming A FSBO – For Sale By Owner

Selling your house by yourself can be especially helpful when trying to avoid foreclosure. The last thing you need when trying to avoid foreclosure is to pay a real estate agent’s commission.

There are 3 reasons why selling your home by yourself is especially helpful when you are trying to avoid foreclosure:

1. Economists have shown that despite what the National Association of Realtors has said, FSBO’S get more money for their homes. Why? Because FSBO’S are more motivated than realtors to get that last $1,000 or $2,000 or even more. Realtors want the deal done and a certain X amount rather than hold out for that extra.

 

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